How subminimum wage affects disabled workers

This article is part of a series for National Disability Employment Awareness Month produced in collaboration with Making Space CEO and disability rights advocate Keely-Cat Wells. These pieces examine the barriers that disabled people face to participating fully and thriving in the workforce, as well as potential structural solutions. The illustrations for this series were created by Dana Chan, an artist discovered through the Making Space platform.

Even though we’ve made strides in labor rights over the years, many disabled workers in the U.S. are still caught in an unfair system. Outdated policies, like subminimum wage laws and restrictive social security programs, keep disabled folks stuck in poverty, unable to achieve economic independence.

An Ableist Legacy of Exploitation

Section 14(c) of the Fair Labor Standards Act, passed in 1938, allows employers to pay disabled workers less than the federal minimum wage in places called “sheltered workshops”—even as low as 25 cents an hour. Section 14(c) was initially created under the guise of helping disabled veterans after World War II, but it’s been used as a tool for exploitation. In these sheltered workshops, disabled folks often do low-skill and repetitive tasks, such as packaging products. Employers of sheltered workshops must obtain a certificate from the Department of Labor to be eligible to pay such wages. Because of this legislation, approximately 40,0000 disabled workers are still stuck with subminimum wages. 

Proponents suggest that these workers receive valuable job experience and transition into competitively paying opportunities, but the truth is that the majority of workers in sheltered workshops remain stuck in low-wage jobs for years, with little to no opportunity for advancement or integration into the mainstream workforce.

According to a report by the National Council on Disability, less than 5% of workers in sheltered workshops ever transition to competitive, integrated employment. Instead, most remain in the same low-skill and low-paying roles indefinitely. This is evident in states like Missouri, where only 2.3% of disabled workers move on to jobs that pay at least the minimum wage. 

Surviving the ‘Benefits Cliff’

But the subminimum wage issue isn’t the only issue that disabled Americans encounter. Programs like Social Security Disability Insurance and Supplemental Security Income create a “benefits cliff,” where earning even a bit too much can result in losing essential benefits like healthcare. In other words, disabled folks are punished for trying to escape the cycle of poverty created by the system. Many then have to limit their career growth by turning down paying opportunities in order to ensure they do not make too much money. Some employers make things worse by capping disabled employees’ hours to dodge offering full-time benefits, leaving them stuck in perpetual underemployment and poverty.

The systemic injustice goes beyond just wages. Disabled folks risk losing benefits if they get married, as their joint income would be too high for them to qualify for lifesaving healthcare. This heartbreaking reality is captured in the powerful new documentary Patrice on Hulu, which follows a disabled couple’s fight against these barriers as they nearly lose everything. It’s a raw look at how deeply flawed these systems are and why urgent reform is needed.

The Business Case for Ethical Practices

Exploiting workers isn’t just bad for employees. It’s also bad for business. Poor wages and unethical policies lead to low morale and high turnover, damaging a company’s reputation. 

“Paying workers low wages is actually very expensive for companies,” said Zeynep Ton, a professor at the MIT Sloan School of Management and founder of the Good Jobs Institute in an interview with Just Capital. She explains that this is because of “the costs of high turnover, the costs associated with low wages like lost sales, lost productivity, mistakes, errors” and “customer frustration.” In today’s world, where customers care more and more about corporate responsibility, companies can’t afford to be behind on fair labor standards.

What Employers Can Do Right Now

Presently, bills like the Transformation to Competitive Integrated Employment Act have been introduced in Congress but have not progressed through the House or Senate. If this Act were to pass, it would phase out sheltered workshops and support the transition of disabled workers into competitive employment settings. But businesses don’t need to wait for these laws to stop such practices. Here’s what companies can do right now to ensure fair treatment of disabled workers:

• Evaluate Wage Policies: Ensure that all workers, including disabled employees, are being paid fairly. Meeting the legal minimum isn’t enough; you should aim for a living wage that considers the unique challenges disabled workers face.

• Offer Full-Time Benefits: Many employers avoid providing healthcare and paid time off by limiting the hours of disabled workers. This short-term strategy hurts in the long run. Offering full-time positions with benefits creates a more loyal and motivated workforce.

• Foster Inclusivity: Invest in creating an inclusive workplace by providing disability awareness training, ensuring accessible facilities, leveraging employee resource groups, and offering assistive technologies. These changes help disabled workers thrive, which benefits the company overall.

Doing Good is Good Business

Subminimum wage and the benefits cliff spotlight the systemic issues of poverty, ableism, and inequality. But businesses have a lot of power to drive change. By adopting ethical labor practices and building inclusive workplaces, companies can support disabled workers and also benefit from helping them.

Changing these unfair policies isn’t just the right thing to do. It’s a smart business move. Companies that lead the way in fair wages and inclusivity will build stronger, more respected brands and attract top talent and loyal customers. Now is the time to invest in ethical practices, and the rewards will follow for your business and employees.